Forex Trading Signal 08/19/09

I didn't think we'd see quite as hearty of a bounce on the EU and GU that we did on Tuesday, but with much higher than expected CPI out of the UK, and ZEW readings out of Germany and the Eurozone, it certainly helped fuel a bigger bounce than I expected. That said, the bigger trend still remains down. After a bit of a turnaround Tuesday, the EUR/USD is likely set up to turn lower Wednesday, but I'm not sure enough about it to make a call of a top just yet. Keep in mind guys, I put this into a reply to a comment in yesterday's signal:

"I'm pretty confident the EUR/USD is in a clear downtrend now, but as everyone knows, even trends have a lot of 2 way action along the way. That's why it's important to be careful about chasing things short. There's only twice I've specifically mentioned it was a good time to enter a position or swing short on EU, and that's August 4th to 6th around 1.4380 and August 13/14th around 1.4250-1.4300. If you're hurting on margin, you obviously chose to sell at some other point and got caught in a bounce. I expected the recent decline to kick back in sooner and with less retracement than we've seen, so I got caught stopping out on a trade or two on GBP/USD, but the overall position is still short.

Be real careful guys, if you trade position, you have to trade much smaller lot sizes and be more patient. The Euro's pending several thousand pip decline if fully realized will likely take 6-9 months to fully form. Along the way we will see some wicked bounces, so you don't want to just blindly short at a break of support and expect to never have it run against you."

Anyways, I'm definitely biased short for Wednesday, but I'm not looking to get too aggressive with it since I'm already in short from higher prices.

On Silver and Gold, I think we're comfortably poised to see sharper declines along with the USD gains and equity market pullback. On Silver particularly I've been calling for long term shorts there anywhere from $13.40 to $15 over the past few weeks, and it's finally starting to roll over. A more pivotal support level will come into play around the $12.80 to $13.90 range as the neckline/trendline support of a sloping head and shoulders will be the key area to watch.

In Stocks, I think we're seeing the typical "break through it, then trade back up to it before continuing on" type of price action that I often talk about. If you remember, the key level we had been watching was about 992 and we blew through it hard early on Monday. Then on Tuesday we floated back up to that general region... so there's a good chance we'll find that area as resistance and have a down day today (Wednesday). If that does happen, a nice selloff will also help fuel the EU and GU lower. In news Wednesday:

0430 BoE Minutes - I'm choosing not to trade this one since more current information was released with the BoE's quarterly inflation report last week. It could end up being a market mover, but the odds are low.

0700 CAD Core CPI m/m (expected at 0.1%) - The USD/CAD seems to be working out of its news trade funk and producing some tradable moves lately, so we'll try to extract something out of this one as long as the Core and Headline numbers come out in the same direction.
If it comes out at 0.4% or higher, USD/CAD should sell off 30 pips.
If it comes out at -0.2% or lower, USD/CAD should rally 30 pips.

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I'm not that sure the Core CAD CPI will be a good call for news trading, I've seen in past months completely unexpected moves on both USD/CAD and EUR/CAD even with good deviations... and when finally, right moves develop, it's just after a 35 counter-move that will stop out any one with tight stop-losses. Perhaps trading the after-spike countermove is a little safer.

On the other hand, I've had very bad losses on swing trading before, so I completely stopped doing that until yesterday when I saw your comments so favorable on EURUSD and GBPUSD shorts that I decided to take the risk... Just for a little added safety, I preferred buying some put options (never traded options before) on those currencies instead of the spot prices, unfortunately, I couldn't get in at the top prices you suggested so my positions right now are:

short in silver (spot) at 13.9325
long in PUT for EU with strike prices 1.37 and 1.40 (with Premiums 15.6 and 82 respectively)
long in PUT for GU with strike prices 1.57 and 1.60 (with Premiums 13 and 29.2 respectively)

All the options expire on August 28.
Right now I'm positive on silver but negative on all the options

What do you think on option trading? do you think prices will go back down and low enough by August 28 to make this trades profitable? or should I better sell the options on a sell-off to make as little damage to my portfolio as possible?

By the way, your signals are excellent, I read your thought about stopping them, please DON'T, let immature traders learn to handle risk by themselves and don't deprive us, who lose or win maturely from this amazing sevice you give.

I did a couple of webinars on options trading for the Diamonds room... generally I recommend at or near the money strike prices with expirations at least one month longer than what you're planning to hold. Oftentimes the loss of time value is so steep on front-month contracts everyday, it's best to avoid holding contracts in their last month before expiration.

Generally, I don't like trading currency options all that much. In certain situations it can be the best way to go, but I find trading in the spot market cheaper and easier since it's open 24-5 unlike most options available.

EUR/USD peaked to 1.4241 is this considered a bump along the way down? I'm new to this so it's scaring the crap out of me.

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I think as long as we're setting a lower high below 1.4325, the case for subsequent downside is quite strong. If we break upwards through that, all bets might be off the table for a bit. I'll talk more about the Euro with my signal tonight. As of right now though, the closer it is to 1.4325, the better of a swing trade short opportunity there is since there's a clear level for a stop loss.

The s&p broke through 993? It looks like we are heading for another high and the euro seems to be very supported at 1.41.

Another question is I've subscribe to the 2 weeks trial since last friday 14 aug(payment already taken) but I have no one contacting me or any emailing response to have access to the diamonds room. I've sent a number of emails and yet to have a response and now resort to posting on this forum. Can you please help?

The s&p broke through 993? It looks like we are heading for another high and the euro seems to be very supported at 1.41.

Another question is I've subscribe to the 2 weeks trial since last friday 14 aug(payment already taken) but I have no one contacting me or any emailing response to have access to the diamonds room. I've sent a number of emails and yet to have a response and now resort to posting on this forum. Can you please help?

Cheers

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When you ask for help here, we have no way of identifying who you are. Anyways, send a message to payments@forexdiamonds.com I asked about it and Crazy Cat said the information should be sent to you automatically after signing up, so if you didn't get anything, you probably didn't complete the sign up process properly or the subsequent email got stuck in a spam folder.

The s&p broke through 993? It looks like we are heading for another high and the euro seems to be very supported at 1.41.

Another question is I've subscribe to the 2 weeks trial since last friday 14 aug(payment already taken) but I have no one contacting me or any emailing response to have access to the diamonds room. I've sent a number of emails and yet to have a response and now resort to posting on this forum. Can you please help?

Cheers

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Hi,

Can you resend your question again? I checked all emails and I don't think I found yours.

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